Intel climbs to year high

Shares of Intel(INTC) stock hit a 52-week high today, following the company's announcement that earnings were 40 percent higher than anticipated.

Intel, which announced its quarterly results after the market's close, reached a high of 114-1/4 a share during afternoon trading. That surpassed its previous high and Monday's close of 107-5/8 per share.

A number of analysts revised their year-end and 1997 earnings estimates for Intel. Rodman & Renshaw, for example, revised its estimate to $5.45 a share for 1996, up from $4.95 per share. Bear Stearns increased its 1997 estimate to $7 a share from $5.90.

The chip giant, an investor in CNET: The Computer Network, reported earnings of $1.3 billion for the quarter, or $1.48 a share, compared with $931 million, or $1.05 per share, a year ago. Intel surpassed analysts estimates of $1.25 a share, according to First Call.

Revenues jumped 23 percent to $5.14 billion for the quarter, compared with a year ago.

Andy Bryant, Intel's chief financial officer, said in a conference call that sales of Intel's Pentium and Pentium Pro helped drive the company's revenue growth, while flash memory chips remained flat in comparison to the previous quarter.

Another thing that helped improve profits were larger gross margins in the third quarter, aided by a shift in product mix, Bryant added. Intel reported gross margins of 57.2 percent.

Intel released its earnings after the market's close and saw its stock jump 4-3/8 to 112 a share in after-hours trading.

But the overall health of the chip industry is a mixed bag. Some have reported or plan to report a healthy third quarter, while others have given a more dour report.

"Intel is a bellwether company. If they're doing well, then the PC market is probably expanding, and that's good for chip makers. But just because Intel is doing well doesn't mean that others will follow," said Ken Pearlman, analyst with Dean Witter.

Pearlman, along with a number of other analysts, say the chip industry is reporting spotty third-quarter results.

"Companies that supply DRAMs (dynamic RAM), SRAMs (static RAM), and logic chips do not offer a clear picture," Pearlman said. "Some say they're turning around, and others are not. Some commodity chip makers that supply SRAMs show an increase in their unit shipments, but their pricing hasn't turned around."

Analysts characterize the chip environment as one that is starting to pick up. "We're in a recovery phase, but the question is how strong will it be?" asked Jonathan Joseph, an analyst with Montgomery
Securities. "It looks like it'll be a strong one and not a weak one- or two-year period before things improve. I think we'll see better order patterns over the next six months, compared with the past six."

The semiconductor industry's book-to-bill ratio, a barometer of the industry's health, has improved for three consecutive months. Moreover, the September figures showed the strongest gains of the year.

But at least one analyst cautioned that a three-month view is shortsighted. "What people missed in the book-to-bill numbers is that both revenues and bookings were down by 30 percent compared with last year," said C.B. Lee, an analyst with Hancock Institutional Equity Services in San Francisco.
"It's not likely we'll catch up to where we were in 1995 by the end of the year."

Nonetheless, Lee and other analysts said that although the industry's performance is not at last year's level, it is getting better.

Outside the improvement in the book-to-bill ratio, the Philadelphia Semiconductor Index has also risen to nearly 200 from a level of around 140 in July. The index had hit a peak of 300 in September 1995.

"I think the industry will be doing better in the coming quarters," Pearlman said. "Things may be bottoming out and turning around."